Saturday, August 28, 2010

New York Times: Fed Ready to Dig Deeper to Aid Growth, Chief Says

New York Times: Fed Ready to Dig Deeper to Aid Growth, Chief Says

Onebornfree commentary:

Dangerous Assumptions

Most people who save money for retirement and investing hold many false assumptions, most of which have their origins in misunderstandings about economics, markets, human action, and governments.

Their assumptions cause them to make serious errors in their long term savings plans and strategies, often unknowingly [often until its too late], thereby exposing money they cannot afford to lose to extreme loss.

Naturally, as with anything else, dangerous assumptions will lead to dangerous consequences.

For example, people who read this headline, Fed Ready to Dig Deeper to Aid Growth, Chief Says, from the New York times sat 08/28/10, and actually believe that the central bank actually can "improve" the economy, suffer, to my mind, under many many dangerous, false assumptions.

Here are just two :

Dangerous assumption [1]: that government people [and related institutions such as the Federal Reserve] can do things more effectively than other people.

Dangerous assumption [2]: that governments [and related institutions such as the Federal Reserve] will produce beneficial results.

I am not going to try to explain to you as to why both these assumptions are completely false [those types of discussions are reserved for clients], I will just make the assertion that these, and many other very similar common assumptions about governments and central banks are simply not true out here in the real world.

Suffice to say that both present and former clients of mine usually understand why this is so [because the issues have been fully explored with most of them].

Making Things Worse?

For the purposes of this blog, however, I would simply state that any further proposed interference by the Federal Reserve system [see NYT article below for its stated options], will either have an even more negative effect on the economy than its prior actions have already had to date, or, simply no effect at all.

In short, the Fed cannot, and will not, "fix" "the economy", only the markets can do this, if it/they are left alone [an extremely unlikely event].

Similarly, other government or quasi-governmental agencies cannot "fix" health care, the environment , or "fairly regulate" markets, institutions etc etc., although, of course, they always claim that they can.

[Tip: never believe any government claims, about anything].

Are You In Serious Trouble- But Don't Know It Yet?

If you believe articles like this and in the magical powers of the Federal Reserve and Mr Bernanke [ or whomever ], I would suggest that you and your life savings are in serious danger .

If you would like to know exactly why those two listed common assumptions and many more like them are false, and how to protect your savings and rid yourself of these and other false assumptions that can and will dramatically reduce the value of your savings/investments in the future, let me know.

Can You Afford It?

As I see it the question is, as I'm expensive and exploring fundamental core assumptions of a client can take a considerable amount of time and mental energy for both parties [its a bit like going to a psychoanalyst!], so, can you afford to talk to me?

I would suggest that since your life savings might well be at risk, a better question might be: can you afford not to?

Regards, onebornfree.

Fed Ready to Dig Deeper to Aid Growth, Chief Says

JACKSON HOLE, Wyo. — The Federal Reserve chairman, Ben S. Bernanke, signaled once again on Friday that the central bank was prepared to act if the economy continued to weaken, as yet another economic report confirmed that the recovery had slowed to a crawl.

Mr. Bernanke made clear that while the Fed could take various steps, including large purchases of government debt, “central bankers alone cannot solve the world’s economic problems.” Speaking at the Fed’s annual symposium here, he hinted broadly that political leaders had to take steps to tackle the deficit and the trade imbalance.

Hours before Mr. Bernanke spoke, the Commerce Department lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth from April through June was 2.4 percent. Economists had been predicting a steeper decline, and stock prices rose after the markets opened.

While Mr. Bernanke announced no new steps that the Fed would take immediately, he said the central bank was determined to prevent the economy from slipping into a cycle of falling wages and prices, a situation he said he did not think was likely. Instead he predicted that growth would continue modestly in the second half of the year and pick up in 2011.

Mr. Bernanke said the Fed, having kept short-term interest rates at nearly zero since 2008, had essentially four options:

It can purchase more government debt and long-term securities. It can try to coax down long-term interest rates by announcing its intention to keep short-term rates extremely low for even longer than the markets currently expect. It can lower the interest rate it pays on the funds banks hold at the Fed. And it can raise its medium-term target for inflation, which would discourage banks from sitting on their cash.

Mr. Bernanke suggested that the first of those options was the most likely, and all but ruled out the last two............."

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